Offering a free trial has basically become the norm for SaaS companies these days. In fact, roughly three-quarters use this tactic to generate leads, with the hopes of ultimately turning many into paying customers.
And for the most part, it’s really effective. More than 50% of new business comes from free trials for 16% of SaaS companies. But there’s one key question you have to ask yourself when using this strategy.
Should you require free SaaS users to provide their credit card info?
Let’s Look at the Data
As you probably know by now, I don’t like speculating on whether something works or not, or simply going on a hunch. I prefer to crunch the numbers and analyze cold, hard, objective data.
According to one of the top studies conducted on this topic from Invesp, it’s pretty clear. You’re way better off not requiring credit card info from free SaaS users.
This stat shows us point blank that not asking for credit card info is the best choice and results in double the paying customers long-term. For the rest of this post, I’m going to fully unpack this data and figure out the precise logic behind it.
Why Eliminating the Card Info Barrier is the Best Choice
It’s pretty simple. Having this barrier creates friction during the free trial sign up process.
They’ve found your SaaS product, have gone over the features and benefits, and think it may be the perfect fit for their business. They then see that you offer a free trial and are excited to test it out.
They fill out their contact info and are chomping at the bit to take your product out for a spin. But then…wham…they’re hit with the dreaded credit card barrier.
Just like that, their enthusiasm takes a nosedive, and their day just had an injection of friction added to it.
Some leads will still go through with it, begrudgingly pulling out their credit card. Many others, however, will simply back out and look to other competitors. While it’s by no means a dealbreaker for everyone, you can’t deny that requiring credit card info for a free trial is disruptive.
I know I personally get turned off when I have to fork over my info. When given the choice between a no strings attached sign up and one requiring a credit card, I always prefer the former. And that seems to be the sentiment across the board with nearly all SaaS customers.
At the end of the day, it’s just another hassle that adds an unnecessary complication to their day.
The Trust Issue
There’s one other vital detail to point out, which involves trust (or the lack thereof). We’re living in an age where cyber crime has reached epic proportions. Just look at this graph of the monetary damage caused by cyber crime during the 21st century.
It’s off the charts.
Understandably, many people aren’t super comfortable with the idea of whipping out their credit card and forking over sensitive payment information. Even big name, well known SaaS companies like HubSpot and Salesforce run into issues stemming from trust.
So just imagine how problematic it can be for smaller SaaS businesses that don’t have a ton of brand equity. And remember, at this stage of the buying journey, your brand is still unproven in the eyes of many leads.
Once they actually use your product for a while and you have a chance to build rapport, they’ll warm up to you. But when they’re signing up for a free trial, you just don’t have that level of trust, which is another huge reason why credit card barriers are so problematic.
What an Expert Has to Say About It
To wrap up, I’d like to share with you the opinion of one of the top voices on this subject matter.
Lincoln Murphy is a customer-centric growth expert and founder of SaaS consulting firm Sixteen Ventures. He wrote a fascinating article about the great credit card info debate, and I think this quote summarizes everything perfectly.
“Asking for a credit card up front (an “opt-out SaaS free trial”) does little to help conversions and this is backed up by the fact that I routinely see SaaS vendors with < 20% conversion rates that ask for a credit card up front,” explains Murphy. “The only thing I can guarantee with an opt-out SaaS free trial is that you’ll get less prospective customers into your free trial than if you didn’t require a credit card to start.
Murphy admits that requiring credit card info might increase your overall conversion rate in the sense that a higher percentage of leads who provide it may eventually become customers. But you’ll get far less actual customers from the traffic you generate.
The Bottom Line
To say that no SaaS companies should ever require credit card info from free users would be a misstatement. There are some cases when this is the better option — mainly for well established businesses with huge brand equity that are looking to increase their lead quality.
But generally speaking, the data clearly shows that this is ill-advised for most SaaS companies. Not asking for credit card info helps you capitalize on a larger percentage of your traffic and generate twice as many paying customers.
So it’s a no-brainer.
Need to find high level salespeople to convert more of your SaaS leads? Check out HireDNA. 92% of reps suggested through it reach the top of their sales force within a year, and brands that use it see 33% less turnover.